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HQ 114282

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March 11, 1998

VES-13-18-RR:IT:EC 114282 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C27-0061069-7; PRESIDENT WASHINGTON, V-86; 19 U.S.C. 1466; Protest

Dear Madam:

This is in response to your memorandum of February 20, 1998, which forwarded the protest submitted by American Ship Management, LLC ("protestant") with respect to the above-referenced vessel repair entry.

FACTS:

The evidence of record indicates the following. The PRESIDENT WASHINGTON (the "vessel"), a U.S.-flag vessel, arrived at the port of Los Angeles, California on December 23, 1991. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in Taiwan.

In Ruling 112484 dated October 4, 1996, the application for relief with respect to the subject entry was granted in part and denied in part.

In Ruling 113784 dated October 21, 1997, the petition with respect to the subject entry was granted in part and denied in part.

ISSUE:

Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a).

LAW AND ANALYSIS:

19 U.S.C. 1466 provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to be employed in such trade.

In its administration of 19 U.S.C. 1466, Customs has held that modifications or additions to the hull of the vessel, which do not involve repairs, are not subject to duty.

The subject entry is a "pre-Texaco" entry, i.e., an entry filed before the appellate decision in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993).

Item 515.1. Hatch Coamings. Almost all of the pertinent invoice clearly reflects repairs, e.g., "longitudinal hatch coaming repair ..."; "furnished labor, equipment and materials to rewelded [sic] the wear out of hatch coamings top plate ..."; and "repair of sloping w.t. baffle plate."

A separately-itemized part of the numerous sheets comprising the invoice for item 515.1 reflects a modification and not a repair, i.e., sub-item 515.1-2 on the bottom part of page 20/64. That part of the invoice provides: "longitudinal hatch coaming modification at expansion joint hatch #2/3."

Accordingly, sub-item 515.1-2 (bottom p. 20/64) is nondutiable and all other parts of item 515.1 are dutiable.

The protestant cites Ruling 112454 dated March 31, 1993 with respect to the PRESIDENT MONROE in support of its claim of nondutiability. It states that "[t]his identical item was performed on the MONROE, a sister ship in the same shipyard..."

We have examined the invoice for item 515.1 for Ruling 112454, and have compared that invoice with the subject invoice for this vessel repair entry. There are significant differences in the two invoices, i.e., most of the language used in the invoices is different. For example, the invoice for Ruling 112454 does not contain most of the various language indicating repairs which is excerpted in the first paragraph of our discussion of item 515.1. (We also note that the costs of the two invoices are different, or materially different. We do not think the cost difference is necessarily determinative, but it may be a relevant factor as to the non-identicalness of the two invoices.)

Thus, we do not find that our findings in Ruling 112454 are determinative with respect to the subject entry.

The basis for our determinations with respect to the subject item is the statements of the pertinent invoice.

We note that there is a similarity in the result of Ruling 112454 and the result of this ruling with respect to item 515.1 in that most of the work was found to be dutiable repairs, but a part was found to be a nondutiable modification.

Item 515.2. Hatch Covers & Bearing Pads. The pertinent invoice clearly reflects repairs, e.g., "repair and modification of the longitudinal girder flange and connection hatch covers #10 and #11" and "furnished labor, equipment and materials to repaired [sic] the hatch covers ..."

Accordingly, this item is dutiable.

The basis for our determination is the statements of the pertinent invoice.

The protestant again cites the PRESIDENT MONROE and Ruling 112454 in support of its claim of nondutiability. We have examined the invoice for item 515.2 in Ruling 112454, and have compared that invoice with the subject invoice for this vessel repair entry. There are significant differences in the two invoices. For example, the invoice for Ruling 112454 does not contain the following language excerpted above: "repair and modification of the longitudinal girder flange and connection hatch covers #10 and #11."

Thus, we do not find that our findings in Ruling 112454 are determinative with respect to the subject entry. The basis for our determinations with respect to the subject item is the statements of the pertinent invoice.

Item 519. "Structure Mod P/S Frame 65" (invoice page 40/64, sub-items 519-12, 1-7). Our consideration here relates only to the specific sub-items referenced above. Ruling 113784, the ruling on the petition, did not address item 519 or any sub-items. Ruling 112484, the ruling on the application, addressed item 519 broadly, but did not specifically address the sub-items noted above. Ruling 112484 noted correctly that item 519 includes numerous repair items.

The heading of the pertinent invoice (i.e., the invoice for the sub-items noted above) provides: "Furnished labor, equipment and materials to modified [sic] the Longitudinal Bulkhead Transition, Fr. 59-61 Just Below the Upper Deck." The remainder of the pertinent sub-items invoice appears to be consistent with the invoice heading. After a consideration of the pertinent sub-items, we find that the cost thereof is nondutiable as a cost of a modification. The work on the pertinent sub-items invoice which indicates a modification is separated from the other invoices for item 519 which reflect repairs.

HOLDING:

As detailed above, the protest is granted in part and denied in part.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Director,
International Trade Compliance
Division

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